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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Models where firms agree to mutually improve their situation






2. The marginal utility from consumption of more and more of that item falls over time






3. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






4. Ed = 8 - infinite change in demand to price change






5. A good for which higher income decreases demand






6. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






7. TR = P * Qd






8. Product demand - productivity - prices of other resources - and complementary resources






9. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






10. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






11. A firm that has market power in the factor market (a wage-setter)






12. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






13. The mechanism for combining production resources - with existing technology - into finished goods and services






14. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






15. AFC = TFC/Q






16. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






17. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






18. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






19. Two goods are consumer substitutes if they provide essentially the same utility to consumers






20. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






21. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






22. All firms maximize profit by producing where MR = MC






23. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






24. The sum of consumer surplus and producer surplus






25. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






26. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






27. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






28. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






29. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






30. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






31. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






32. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






33. Ed < 1






34. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






35. The total quantity - or total output of a good produced at each quantity of labor employed






36. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






37. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






38. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






39. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






40. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






41. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






42. The lost net benefit to society caused by a movement away from the competitive market equilibrium






43. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






44. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






45. The ability to set the price above the perfectly competitive level






46. ATC = TC/Q = AFC + AVC






47. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






48. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






49. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






50. The practice of selling essentially the same good to different groups of consumers at different prices